Last year, Sir Martin saw his base salary jump by nearly a third to £1.3m. He also received £459,000 of benefits and just over £5m under WPP’s short-term bonus schemes, pushing his 2011 pay up by nearly 60pc to £6.77m. Contributions to Sir Martin’s pension jumped 46pc to £585,000.

On top of this, Sir Martin received a windfall of almost £5.6m-worth of shares under the company’s long-term bonus scheme, the Leadership Equity Acquisitions Plan.

However, unveiling higher profits and revenues on growth in emerging markets, he said the reality is that the UK is a competitive market and high pay is needed to retain talent.

"If we want more WPPs in the UK, we have to get a better understanding of what is necessary. There are arguments on both sides, and its a question of what you want at the end of the day in terms of competitive enterprises.

"What drove our business is growth outside the UK, in places like Asia and Africa, where they are not subject to these competitive things."

His views came as WPP revealed it is to move its headquarters back to the UK after the Coalition changed tax laws.

The decision will be a huge boost for the Chancellor, who on Wednesday blasted Deputy Prime Minister Nick Clegg's proposal to impose a time-limited emergency tax on Britain's wealthiest.

WPP chief Sir Martin Sorrell said on Thursday that he agreed with the Deputy Prime Minister's plan but said a better plan for the economy would be reduce capital gains tax rate to encourage entrepreneurs.

The group moved its HQ to Ireland in 2008 in a bid to slash its tax bill. The country's 12.5pc corporation tax rate is less than half the British rate.

However, the media giant, which operates in 107 countries, will now move back to the UK after the Government announced in February that profits of foreign subsidiaries will no longer be potentially subject to tax unless an exemption is met. A charge will only arise on the proportion of overseas profits that have been "artificially diverted" from the UK.

The rules are intended to capture companies that artificially divert UK profits to low tax territories or other favourable overseas tax regimes to reduce their UK tax liabilities.

"The UK Coalition government has now enacted legislation covering the taxation of foreign profits from 2013," WPP said in its interim results. "This will mean that, at least for the life of this Government, there will be no tax cost to the group by returning its headquarters to the UK from Ireland. The decision to return to the United Kingdom has already been approved by the board and will require share owners consent at an EGM planned for early December."

The news came as WPP shares led the FTSE 100 loserboard on Wednesday, despite higher revenues and profits on its performance in emerging markets.

The group warned of slower growth rates this year compared with 2010 and 2011, and a depressed advertising market. WPP investors took fright at the company's warning that next year "is likely to be more challenging", with the shares down 4.5pc to 794p in early trading.

Net debt in the first six months of 2012 grew to £2.9bn from £2.6bn in 2011.

Overall group revenues rose to £4.97bn in the six months to June 30, up from £4.71bn in the same period last year. Pre-tax profits climbed to £357.7m from £334.3m.

The African, Asian and Latin American arm led the group, with like-for-like revenues up 9.7pc to £1.14bn, driven by the consumer insights business.

"China will be the largest advertising market in the world," Sir Martin said.

However, North American revenues fell 0.6pc in the second quarter and rose just 0.4pc in the first half as a whole. The US and the eurozone markets continue to be overshadowed by the ongoing debt crisis, with growth rates in these regions under pressure.

"Although corporate balance sheets are much stronger than pre-Lehman and confidence is higher as a result, the eurozone, Middle East, China hard or soft landing and US deficit uncertainties demand caution," WPP said.

"There is also the elephant in the room, that many ignore, the growing US fiscal deficit, which with the nomination of Paul Ryan as the Republican Vice-Presidential nominee, looks set to be the defining issue of the 2012 US Presidential campaign."

Sir Martin told CNBC that he believes President Barack Obama would win the election, as he is a "superb campaigner", and would have to deal with deficit next year. This would add to a "challenging" 2013 for WPP, with 2014 looking "a better prospect".

Advertising and media investment management remained the strongest performing sector for WPP, with like-for-like growth of 5.9pc in the second quarter following a 6.2pc jump in the first three months.

"Our digital business is strong," Sir Martin said. "It is now 32pc of our business after a standing start 10 years ago. It could be half of our business in another 10 years."